Need Advice On A Blanket Loan Refinance

[John E Ceisel]

Hi BP!

I have 3 condos in San Diego that I'd like to refinance and take equity out of (to pay down debt). I estimate their combined value based on the current market to be around $900k.

The goal would be to extract max cash out. There is currently $428,000 in combined mortgage debt + a HELOC on the properties. The 3 condos are under-rented and cash flowing at about $1,800/month combined positive after all expenses today.

At 75% LTV... refinancing the condos alone (assuming a value of $900k) would put the cash out potential amount at $247k. I'm shooting for a 30 year fix loan w/ low interest rate.

My questions are as follows:

1)  What is a typical interest rate that one could expect on a blanket loan similar to this one?

2)  Do lenders typically allow cash out's ($247k seems like a big number) on blanket loans?

3)  Who would be the best lender/entity to approach for this type of financing?  Could I do it with a conventional lender using a 30 year fixed? 

Anyways, I appreciate any insight/guidance you guys can offer.  Thank you!

[Bill Gulley]

How many times did did your BS Meter go off in this thread? LOL

A blanket mortgage is a commercial loan, a particular lender may state a loan to value but there is no rule as to the LTV as there is with residential loans. A cash out could very well be 50% to 70%, (or they may not do cash outs) depending on the lender so you'll need to ask and shop around.

Each property must be appraised and title insurance obtained on each, so you're not saving much in loan costs except they may close as one transaction, filing fees will be applied to  each property as well. A lender may want all properties insured by the same company with the same renewal date, so you may need to adjust things and see your agent before applying for a blanket mortgage simply to know what the costs will be. 

You won't be getting a 30 year fixed rate on a blanket loan, it will be adjustable and have a limited term, the amortization may be  30 years or could be less, that will be up to the lender in offering you the loan. 

Make sure you get a "Release Fee" on each property; this is an amount that is to be paid to release a property as collateral in the event you need to sell, or if you have an insurance loss that insurance proceeds will be applied to the subject property and not to the whole loan keeping you stuck with an encumbered damaged property, remember they don't make construction loans as a second and the blanket loan won't subordinate (usually) to another lender, it could get messy, so have a release fee stated and understand how payments will be applied.

A line of credit is not a blanket mortgage but a line of credit can use other collateral, different animal and it may or may not fit you needs. Again, costs will be incurred with each property taken as collateral and you will have the release fee requirement as well with a LOC. I wouldn't advise a LOC with additional collateral.

Interest will be market rate, might be higher due to more loan administration with some lenders. They will be fixed for a short term then adjusted or renewed or they will be adjustable, there may or may not be a cap  rate, so check on the index and the spread as well. Loan terms will vary from lender to lender.

Blanket loans can be dangerous as all your eggs are in one basket with that lender, they don't foreclose on just one property but on all of them. They have no obligation to renew any loan, so you might be scrambling to find other loans. A lender may also want stronger debt coverage ratios and be tougher on appraisals because they will have more work involved securing several  properties if things go south for any reason.

Your loan amount is rather small for a blanket loan, you should have better luck with a small lender/bank or regional bank as many larger lenders may want a minimum loan of $500K or 1M.  Again, loan administration costs are more so they may have limits. 

I'd bet you'd be better off getting separate loans from the same lender when it's all said and done. Good luck :)